In an earlier article, we discussed the different approaches to building a marketplace platform. The goal of this article is to help you choose the right software solution.

As we previously discussed, there are five approaches to building the technology that powers your online marketplace.

There are essentially five different methods for building an online marketplace:

• Method #1 – Code it from scratch
• Method #2 – Pay someone else to code it from scratch
• Method #3 – Build it yourself on top of existing self-hosted marketplace software
• Method #4 – Pay someone else to build it on top of existing self-hosted marketplace software
• Method #5 – Build it yourself using a hosted software solution (SaaS)

In this article, we assume you’ve decided to choose one of methods 3-5, which means you plan to utilize existing software to build your platform.

There are dozens of marketplace software solutions out there, and new ones are launched almost every month. Making a full comparison is not possible within the scope of this article. Furthermore, any such analysis would be biased since, at Sharetribe, we’re building such software ourselves.

Instead, we’re going to discuss the underlying principles you should keep in mind when comparing and choosing the software solution that best fits your particular concept. These are the things you should consider when choosing a marketplace software vendor.

What is the focus of the software?

No software solution handles all different types of marketplace ideas perfectly. The more focused the marketplace software is to your specific type of marketplace, the more likely it is to be a good fit for you.

Different dimensions affect the choice of software:

• Is your marketplace about selling products or services?
• If it’s about products, are they physical or digital?
• Is it consumer-to-consumer (C2C), business-to-consumer (B2C), or business-to-business (B2B)?
• Do you want to build a website or a mobile app?

As an example, Sharetribe Flex focuses on marketplaces in the “sharing economy”: C2C and B2C web or mobile platforms that deal with rentals (think Airbnb) or booking local services (think Handy, Treatwell or Rover). Meanwhile, Sharetribe Go supports also C2C marketplaces for selling physical products (think eBay), but it doesn’t allow for mobile apps. Izberg is a good fit for those looking to build a marketplace where retailers sell their products (think Amazon or Alibaba). If you are focusing on digital products (think Themeforest), Marketify combined with Easy Digital Downloads might be a good solution for you. If you need an Uber-style ride-hailing app, you might want to take a look at LibreTaxi.

How easy is it to extend the software?

Building a successful marketplace platform is a process, not a project. The initial launch of your platform is just the very beginning. After launch, once you get data by talking to your users and looking at your analytics, you should be able to constantly adapt your platform. This means your software solution needs to be easily adaptable.

While an off-the-shelf software solution might be enough for initial validation, sooner or later you will need to build features specific to your concept—your secret sauce that separates you from the competition. Due to the unique nature of these features, your marketplace software vendor most likely won’t offer them out of the box. Building a new platform from scratch at this point would be extremely painful, so you need to make sure your vendor offers the possibility to extend their platform to allow you to grow your marketplace without having to start from scratch.

If the vendor’s software is open source (like with Sharetribe Go), you’re good to go: you can simply take the code, install it to your own server, and customize away. However, this approach also has its downsides. Since marketplace software can be quite complex, it means a steep learning curve for your developers. The platform might also contain features you don’t really need, which can slow down customization work due to the unnecessary complexity. Finally, it locks you into using specific technologies instead of allowing your developers to use the language and frameworks they are most comfortable with. Thus, before moving forward with an open source solution, be sure to get an opinion on the customizability of the codebase from a developer.

An alternative to this approach is a model where you access all your marketplace data via an application programming interface (API) provided by a vendor. This allows your developers to fully customize the workflow and user interface of your platform, integrate any third party software, or build mobile apps. At the same time, you benefit from the core marketplace functionality offered by the vendor, like search, payments, messaging, reviews, availability and scheduling, moderation, and analytics tools for the marketplace operator. This is the approach used by Sharetribe Flex.

In general, using a solution built specifically for two-sided marketplaces is recommended. There are also more general CMS (like WordPress) or e-commerce (like Magento) solutions that can be converted into marketplaces by using a host of third-party plugins. The benefit of using WordPress or Magento is a large ecosystem of plugins and developers. However, the downside is that these software solutions contain a lot of overhead: you don’t need most of their functionality if you’re building a marketplace. This overhead might not matter much in the beginning, but as you continuously adapt your platform, it becomes a burden and results in sluggish development.

Is the vendor’s business model aligned with yours?

Entering into a partnership with a marketplace software provider is a major decision. You want to be sure their interests are aligned with yours. The best way to understand this is to look into how they are making money.

If the vendor is charging a large amount of money upfront—before you have launched anything—beware. In such a model, the vendor makes money whether you succeed or not. This means their incentive is to create an attractive-sounding, long list of features, possibly at the cost of adaptability.

If the revenue model of the vendor is based on your user or transaction volume, you’re probably in good hands: they will only make significant money if you do as well, which is a good starting point for a partnership.

What kinds of services does the vendor provide?

Does the vendor offer hosting, server monitoring, automatic software updates and data backups? If you’re not technical, you will need all these. You also want to make sure they adhere to all the best security practices and handle regulatory compliance.

Many vendors offer some kind of free trial period. You should use this time before committing to a purchase, and test all the aspects of the software thoroughly. During this time, it’s also a good idea to be in touch with the vendor’s customer service. Based on our experience, you will end up communicating with the customer support of your marketplace vendor a lot as your platform starts growing, so you want to make sure they answer quickly and to the point, and that making yourself understood is easy.

What references does the vendor have?

The vendor you choose is an important partner, almost comparable to a new team member. If this relationship doesn’t work well, your business probably won’t either. You should approach the selection process with the same seriousness as you would approach recruiting.

Interview your vendor. Ask them how long they have been in business, how big their team is, what is their financial situation, and how many paying customers they have. Ask them to provide examples of their most successful customers, both in general and in your domain.

You want to find a vendor that is willing to both share such information openly and demonstrate that they themselves have traction and others have been able to succeed with them. You need to be able to trust the vendor fully; communication with the vendor should feel natural and easy.

Summary

Several different factors affect the choice of the right software for powering your marketplace.

Some of these are related to the software itself. It should be focused on solving the problems in your specific industry. It’s also important that you’re able to continuously adapt the software when learning from your users while you build features that are unique to your concept.

Other factors are related to the vendor. Their business model should be aligned with yours. They should be able to provide all the required services you need on top of their software offering. They should be reliable, responsive, and a trustworthy partner that is easy to communicate with.

Choosing the right software vendor can have a tremendous impact on your success, so it’s a process you want to approach carefully. Be sure to talk to several vendors and compare their offerings thoroughly before committing to a single solution. If you end up finding the perfect technical partner for your marketplace, you’ve got a huge head start on your competition.

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    Article by: Juho Makkonen

    Juho has been building marketplace websites since 2008. He is a Co-Founder of Sharetribe and currently serves as the CEO of the company. He’s also a OuiShare connector in Helsinki and a long time advocate of the sharing economy.

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